All my foreign currency income and expenses go through my forex account. Do I have to separately convert the income and expenses for tax purposes?
Yes. The rules governing the translation (often called the ‘conversion’) of foreign currency denominated income and expenses are different from the rules relating to the calculation of forex gains and losses resulting from the effect of exchange rate fluctuations (such as those on forex accounts). In very general terms, the translation rules in Subdivision 960-C of the ITAA 1997 specify how and when you should translate (convert) foreign currency denominated amounts that are relevant to taxation (including income and expenses) into equivalent Australian dollar amounts. The forex measures in Division 775 of the ITAA 1997 apply to calculate gains and losses that occur as a result of the effects of currency exchange rate fluctuations. They apply to a broad range of foreign currency denominated assets and liabilities (foreign currency; and rights, parts of rights, obligations and parts of obligations that are denominated in foreign currency such as a forex account).
